Atlantic Sapphire ASA: Proposed fully underwritten rights issue of up to USD 60 million and directed convertible loan issue of minimum USD 20 million
NOT FOR DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, THE HONG KONG SPECIAL ADMINISTRATIVE REGION OF THE PEOPLE’S REPUBLIC OF CHINA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. OTHER RESTRICTIONS ARE APPLICABLE. PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT
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Miami, 20 August 2024:
The board of directors of Atlantic Sapphire ASA (the “Company”) has today, subject to approval by an Extraordinary General Meeting (the “EGM”), to be held on or about 17 September 2024, resolved to carry out a rights issue of shares (the “New Shares”) with preferential subscription rights for existing shareholders (the “Rights Issue”) to raise gross proceeds of up to the NOK-equivalent of USD 60 million. The subscription price in the Rights Issue is proposed set to NOK 0.10 per New Share. Subscribers in the Rights Issue will for every two New Shares subscribed and allocated receive one warrant to subscribe for one new share in the Company. In addition, Underwriters will receive one warrant to subscribe for one new share in the Company for every two underwritten offer shares (including offer shares that would have been allocated if the Convertible Loan proceeds had participated in the Rights Issue) (the “Warrants”). Subsequent exercise of Warrants will increase the gross proceeds to the Company.
Certain existing shareholders, including Nordlaks Holding AS (“Nordlaks”), Condire Management (“Condire”) and Strawberry Capital AS, and external investors (jointly the “Underwriters”) have underwritten the NOK-equivalent of USD 60 million of the Rights Issue. Further, certain existing shareholders, including Nordlaks and Condire Management AS have pre-committed to use their subscription rights to subscribe for their pro-rata share.
In addition to the Rights Issue, the Company has, subject to agreement and execution of final loan documentation and approval by the EGM, secured a convertible loan of the NOK-equivalent of minimum USD 20 million directed towards Condire and potentially Nordlaks, in accordance with settlement mechanics further described in this stock exchange notice (the “Convertible Loan”, and together with the Rights Issue and the Warrants, the “Transaction”). Participants in the Convertible Loan will also receive one Warrant for every two shares that would have been allocated as if the Convertible Loan proceeds had participated in the Rights Issue.
The net proceeds from the Rights Issue is, together with existing cash on balance sheet, an existing RCF, the amendments to the existing debt facility, and the Convertible Loan, currently estimated to be sufficient to fund investments and operations towards achieving positive EBITDA for Phase 1, currently estimated for Q4 2025. The Company further estimates an optimized Phase 1 to deliver 8,250-8,750 tons HOG of salmon in annual harvest at an EBITDA of USD 1.5-2.0 per kg as if on a stand-alone basis. In connection with and subject to the Transaction, DNB Bank has credit approved certain amendments to the Company’s existing debt facilities. In total, the fundraise and adjustments to the bank package are expected to fully finance the Company’s funding requirement of USD 94 million to optimize Phase 1 and corresponding positive EBITDA.
Any future proceeds from exercise of Warrants are expected to be used towards the Company’s Phase 2 expansion at the same site in Florida, US. The Company’s Phase 2 is expected to increase annual harvest volumes up to a total of 25,000 tons HOG of salmon at a target EBITDA of USD ~5 per kg.
Notice of the EGM, including proposed resolutions regarding the Rights Issue, the Warrants and the Convertible Loan, is expected to be sent to the shareholders on or about 27 August 2024.
Arctic Securities AS and DNB Markets, a part of DNB Bank ASA, have been engaged as managers for the Rights Issue (the “Managers”). Advokatfirmaet CLP DA is acting as legal advisor to the Company, and Advokatfirmaet BAHR AS is acting as legal advisor to the Managers.
Underwriting:
Pursuant to, and subject to, the terms and conditions of the underwriting agreements between the Company and the Underwriters (the “Underwriting Agreements”), the Underwriters have undertaken on a pro-rata basis (not jointly) to underwrite an aggregate subscription amount in the Rights Issue of the NOK-equivalent of up to USD 60 million (the “Total Underwriting Obligation”), subject to potential reduction for Condire and Nordlaks described below. Any New Shares subscribed in the Rights Issue will reduce the underwriting commitment of the Underwriters but not pre-commitments from existing shareholders. Each Underwriter is entitled to an underwriting fee of 10% of its respective underwriting obligation, to be settled in new shares in the Company issued at the subscription price in the Rights Issue (the “Underwriting Fee”). Further, each Underwriter is entitled to Warrants as set out in a separate section of this stock exchange notice. The selection of shareholders who have been invited to underwrite has been based on objective criteria. The Underwriters have undertaken to vote any shares held by them at the time of the EGM in favor of the Transaction.
The Underwriters include, but are not limited to, the investors listed below:
• Nordlaks Holding AS (owning 12.95% of the Company) expects to participate in the underwriting consortium with the NOK-equivalent of USD 15 million in the Rights Issue.
• Condire Management LP (owning 12.48% of the Company) expects to participate in the underwriting consortium with the NOK-equivalent of USD 15 million in the Rights Issue.
• Strawberry Capital AS, (owning 8.57% of the Company) expects to participate in the underwriting consortium with the NOK-equivalent of USD 5 million in the Rights Issue.
• Nokomis Capital, LLC, as external Underwriter, has undertaken to participate in the underwriting consortium with the NOK-equivalent of USD 15 million in the Rights Issue.
A complete list of Underwriters will be provided in conjunction with the Company’s EGM and in the Prospectus (defined below).
The underwritings and pre-commitments made by Nordlaks and Condire to subscribe for New Shares are limited such that their holding of shares shall not exceed 19.99%, and any remaining underwriting and pre-commitments by Nordlaks and Condire shall be satisfied in the form of addition to the Convertible Loan as described below (the “Adjustment Mechanism”). Any such settlement in the Convertible Loan is dependent on the level of use of preferential subscription rights used by other shareholders, and any settlement into the Convertible Loan will reduce the overall size of the Rights Issue on a dollar-for-dollar basis.
Subscription price, subscription rights, Warrants and proceeds:
The subscription price for the New Shares to be issued in the Rights Issue is proposed set to NOK 0.10 per New Share. The exact number of New Shares to be issued and the final size of the share capital increase will be proposed by the board of directors to the EGM. A new face value of the shares will also be proposed at the EGM.
Pursuant to section 10-4 of the Norwegian Public Limited Companies Act, the shareholders of the Company at the date of the EGM, and who are not resident in a jurisdiction where such offering would be unlawful or, (in jurisdictions other than Norway) require any prospectus, filing, registration or similar action, will be granted a preferential right to subscribe for and be allocated the New Shares in proportion to the number of shares in the Company they own as of that date, and will according to the board of directors’ proposal receive subscription rights proportionate to their existing shareholding as registered in the Company’s shareholder register in the Norwegian Central Securities Depository (the VPS) at the expiry of the date of the EGM, currently expected 17 September 2024. Provided that a purchase of shares is made with ordinary T+2 settlement, shares purchased up to and including 17 September 2024 will give the right to receive subscription rights, whereas shares purchased from and including 18 September 2024, will not give the right to receive subscription rights. The subscription rights will be sought tradable and listed on the Oslo Stock Exchange from and including the first day of the subscription period and until 16:30 (Oslo time) four trading days prior to the expiry of the subscription period. Over-subscription and subscription without subscription rights will be permitted.
The subscribers in the Rights Issue and Convertible Loan, and the Underwriters, will without cost be allocated Warrants as follows:
• 0.5 tradeable Warrant will be issued for every underwritten offer share in the Rights Issue (rounded down to the nearest whole number of Warrants);
• 0.5 tradeable Warrant will be issued for every allocated offer share in the Rights Issue (rounded down to the nearest whole number of Warrants); and
• 0.5 tradeable Warrant issued per share that would have been allocated as if the Convertible Loan proceeds had participated in the Rights Issue (rounded down to the nearest whole number of Warrants).
The Warrants will, among other things, have the following terms:
• Each Warrant will give the holder a right to subscribe for one new share in the Company.
• The Warrants may be exercised in the following windows and at corresponding exercise prices:
o During the first 10 trading days of December 2025, at a 20% premium to the subscription price in the Rights Issue, after which the exercise price will be at a 30% premium to the subscription price in the Rights Issue.
o During the first 10 trading days of December 2026, at a 30% premium to the subscription price in the Rights Issue, after which the Warrants will lapse without any value to the holder.
o Notwithstanding the above, in the event the Company launches one or more equity raises following completion of the Rights Issue where the Company in the aggregate raises gross proceeds of at least USD 100 million prior to December 2026 (the “Qualifying Equity Raise”), the Warrants shall be exercisable in conjunction with such equity raise at a 15% premium to the share price of the Rights Issue.
o Beginning four months following a Qualifying Equity Raise, the Company shall promptly inform the market whenever the daily volume-weighted average price (VWAP) of the Company’s shares exceeds 200% of the then-effective Warrant exercise price over any consecutive 20-trading-day period. The exercise price per share shall be at a 20% premium to the Offer Price until the end of the first 10 trading days of December 2025 and thereafter the exercise price per share will be at a 30% premium to the Offer Price. Following such stock exchange notice, Warrant holders will have the right to exercise their Warrants the subsequent 10 trading days.
The Warrants will also be governed by the following provisions:
• The exercise price shall be subject to Euro-market standard anti-dilution provisions dealing with, inter alia, share consolidations, share splits, spin-off events and reorganisations (provided that no adjustment shall occur as a consequence of issuance or exercise of the Convertible Loan contemplated to be issued in connection with the Transaction). The anti-dilution provisions will also provide for fair market value compensation to the warrant holders in respect of any event that would otherwise cause an anti-dilution adjustment resulting in an exercise price lower than the nominal value of a share.
• The terms of the Warrants and the Company’s articles of association will regulate that the Warrants shall be subject to the same disclosure obligations that apply to certain financial instruments pursuant the Norwegian Securities Trading Section 4-3. The disclosure obligation shall apply when a Warrant holder’s proportion of shares and Warrants reaches, exceeds or falls below 10 per cent, 15 per cent, 20 per cent, 25 per cent, one-third, 50 per cent, two-thirds or 90 per cent of the votes calculated pursuant to the Securities Trading Act Chapter 4. No warrant holder shall be permitted to exercise Warrants in the event of a material breach of these disclosure obligations.
The Company shall use reasonable efforts to seek to ensure that the Warrants are admitted to trading on Oslo Børs as soon as possible following completion of the Rights Issue but there can be no assurance that such admittance to trading will be obtained.
Subject to balancing between the Rights Issue and the Convertible Loan dependent on use of subscription rights, as further described below, the maximum gross proceeds from the Rights Issue will be the NOK-equivalent of USD 60 million and a minimum of USD 49 million (notwithstanding Underwriting Fee and Warrants).
The gross proceeds from the exercise of Warrants will depend on the number of Warrants issued and exercised, as well as the final exercise price for the Warrants, determined as described above.
Convertible Loan:
The Company has, subject to agreement and execution of final loan documentation and approval by the EGM, secured a directed Convertible Loan from Condire amounting to a minimum of USD 20 million. In accordance with the Adjustment Mechanism, the Convertible Loan may be increased by up to USD 11 million by way of settlement of Underwriting made by Condire and Nordlaks, subject to the total utilization levels of the preferential subscription rights and in order to ensure that the ownership of Condire and Nordlaks individually does not exceed 19.99%. If the Adjustment Mechanism comes into effect, each of Condire and Nordlaks may be allocated up to USD 5.4 million in the Convertible Loan which would come in addition to the minimum size of the Convertible Loan of USD 20 million.
Further, the terms of the Convertible Loan are expected to be as follows:
• 6 years tenor, senior unsecured.
• Strike price corresponding to a premium of 30% to the subscription price in the Rights Issue.
• Conversion incentive following a Qualifying Equity Raise where the strike premium will be reduced to 15% premium to the subscription price in the Rights Issue for a period of 20 business days. If the conversion right is not exercised within such period, the conversion right will lapse and the Convertible Loan may no longer be converted.
• 10% PIK interest p.a. or 8% cash interest at the Company’s sole discretion.
• Each Lender may require that as an alternative to an exercise of Warrants with a cash settlement, the Company shall issue new shares where the subscription price is settled by way of set-off against that Lender’s participation in the Convertible Loan, subject to applicable law and a procedure to be agreed between the Company and that Lender.
• No Lender shall be permitted to exercise Conversion Rights if and to the extent that such exercise would result in such Lender, taken together with its affiliates and related parties, owning more than 19.99 per cent. of the issued share capital of the Company.
• Customary anti-dilution mechanisms.
Amendments to bank debt terms:
In connection with, and subject to the contemplated fundraise, DNB Bank has agreed to the following amendments to the current loan facility:
• No installments on Term Loan for remaining of 2024 and 2025.
• Adjustments of financial covenants to reflect current business plan.
• In addition to the abovementioned adjustments to Phase 1 Term Loan facility, the Company and DNB Bank have jointly agreed to cancel the uncommitted and undrawn Phase 2 Delayed Term Loan, in order to remove commitment fees on the undrawn debt and improve liquidity.
• DNB Bank has credit approved a reduction in the minimum liquidity covenant of USD 5 million that can be utilized towards the construction of the well investment for Phase 2 once 50% of the well is completed. The new minimum liquidity will post drawdown be USD 10 million.
• Subject to a fully guaranteed fundraise, DNB Bank has agreed for the Company to draw up to USD 10 million above its borrowing base on the RCF until proceeds from the fundraise is received.
Prospectus and indicative timeline:
In connection with the Right Issue, a prospectus (the “Prospectus”) will be prepared which is subject to the approval by the Norwegian Financial Supervisory Authority (the “NFSA”), expected to be obtained on or about 19 September 2024. The Prospectus will be published prior to the commencement of the subscription period and will form the basis for subscriptions in the Right Issue. Provided that the prospectus is approved by the NFSA in time, the subscription period for the Rights Issue will commence on 20 September 2024 and expire on 4 October 2024 at 16:30 hours (Oslo time). In the event that the Prospectus is not approved in time to uphold this subscription period, the subscription period will commence on the second trading day on the Oslo Stock Exchange following the approval and expire at 16:30 hours (Oslo time) two weeks thereafter. A further description of the Rights Issue and of other circumstances that must be considered upon subscription of shares in the Rights Issue will be included in the Prospectus.
Included below is an indicative timeline for the Rights Issue:
• 17 September 2024: Extraordinary general meeting
• 17 September 2024: Last day of trading in the shares including subscription rights
• 18 September 2024: First day of trading in the shares excluding subscription rights
• 19 September 2024: Record date for determination of the right to receive subscription rights
• On or around 19 September 2024: Publication of the Prospectus
• 20 September 2024: Commencement of the subscription period and first day of trading in the subscription rights
• On or around 30 September 2024: Last day of trading in the subscription rights
• On or around 4 October 2024: Last day of the subscription period
• On or around 7 October 2024: Allocation of the New Shares and Warrants
• On or around 10 October 2024: Payment of the New Shares
• On or around 15 October 2024: Registration of the share capital increase with the Norwegian Register of Business Enterprises
An updated company presentation is available through the Company’s web page.
For further information, please contact:
Gunnar Aasbø-Skinderhaug, Atlantic Sapphire ASA, Deputy CEO/ CFO
Gunnar@atlanticsapphire.com
Investorrelations@atlanticsapphire.com
This information is considered to be inside information pursuant to the EU Market Abuse Regulation (MAR) and is subject to the disclosure requirements pursuant to MAR article 17 and section 5-12 of the Norwegian Securities Trading Act.
This stock exchange announcement was published by Gunnar Aasbø-Skinderhaug, Deputy CEO/ CFO on the time and date provided, on behalf of the Company.
About Atlantic Sapphire ASA:
Atlantic Sapphire is pioneering Bluehouse® (land-raised) salmon farming, locally, and transforming protein production, globally. Atlantic Sapphire operated its innovation center in Denmark from 2011 until 2021 with a strong focus on R&D and innovation to equip the Company with the technology and procedures that enable the Company to commercially scale up production in end markets close to the consumer.
In the US, the Company holds the requisite permits and patents to construct its Bluehouse® in an ideal location in Homestead, Florida, just south of Miami. The Company’s Phase 1 facility is in operation, which provides the capacity to harvest up to approximately 9,500 tons (HOG) of salmon annually. The Company completed its first commercial harvest in the US in September 2020. Atlantic Sapphire is currently constructing its Phase 2 expansion, which will bring total annual production capacity to 25,000 tons and has a long-term targeted harvest volume of 220,000 tons.
This announcement does not constitute an offer of securities for sale or a solicitation of an offer to purchase securities of the Company in the United States or any other jurisdiction. Copies of this document may not be sent to jurisdictions, or distributed in or sent from jurisdictions, in which this is barred or prohibited by law. The securities of the Company may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”). The securities of the Company have not been, and will not be, registered under the U.S. Securities Act.
Any sale in the United States of the securities mentioned in this communication will be made solely to “qualified institutional buyers” as defined in Rule 144A under the U.S. Securities Act. No public offering of the securities will be made in the United States. Any offering of the securities referred to in this announcement will be made by means of the Prospectus. This announcement is an advertisement and is not a prospectus for the purposes of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on prospectuses to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (as amended) as implemented in any EEA Member State (the “Prospectus Regulation”). Investors should not subscribe for any securities referred to in this announcement except on the basis of information contained in the Prospectus. Copies of the Prospectus will, following publication, be available from the Company’s registered office and, subject to certain exceptions, on the websites of the Managers.
In any EEA Member State, this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Regulation, i.e., only to investors who can receive the offer without an approved prospectus in such EEA Member State.
In the United Kingdom, this communication is only addressed to and is only directed at Qualified Investors who (i) are investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the “Order”) or (ii) are persons falling within Article 49(2)(a) to (d) of the Order (high net worth companies, unincorporated associations, etc.) (all such persons together being referred to as “Relevant Persons”). These materials are directed only at Relevant Persons and must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which this announcement relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. Persons distributing this communication must satisfy themselves that it is lawful to do so.
This document is not for publication or distribution in, directly or indirectly, Australia, Canada, Japan, the United States or any other jurisdiction in which such release, publication or distribution would be unlawful, and it does not constitute an offer or invitation to subscribe for or purchase any securities in such countries or in any other jurisdiction. In particular, the document and the information contained herein should not be distributed or otherwise transmitted into the United States or to publications with a general circulation in the United States of America.
The Managers are acting for the Company in connection with the Rights Issue and no one else and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for providing advice in relation to the Rights Issue or any transaction or arrangement referred to in this announcement.
Matters discussed in this announcement may constitute forward-looking statements. Forward-looking statements are statements that are not historical facts and may be identified by words such as “anticipate”, “believe”, “continue”, “estimate”, “expect”, “intends”, “may”, “should”, “will” and similar expressions. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions. Although the Company believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control. Such risks, uncertainties, contingencies and other important factors could cause actual events to differ materially from the expectations expressed or implied in this release by such forwardlooking statements. The information, opinions and forward-looking statements contained in this announcement speak only as at its date and are subject to change without notice. This announcement is made by and is the responsibility of the Company. Neither the Managers nor any of their respective affiliates makes any representation as to the accuracy or completeness of this announcement and none of them accepts any responsibility for the contents of this announcement or any matters referred to herein.
This announcement is for information purposes only and is not to be relied upon in substitution for the exercise of independent judgment. It is not intended as investment advice and under no circumstances is it to be used or considered as an offer to sell, or a solicitation of an offer to buy any securities or a recommendation to buy or sell any securities of the Company. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy, fairness or completeness. Neither the Managers nor any of their respective affiliates accepts any liability arising from the use of this announcement.
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