EREDENE CAPITAL : Proposed Tender Offer and Cancellation

3 November 2014

Eredene Capital PLC

("Eredene" or the "Company")

Proposed Tender Offer and Cancellation

The Company today announces that a circular (the "Circular") will be sent to Shareholders later today detailing the following proposals:

·      a tender offer, closing at 1.00 p.m. on 2 December, for up to 12 per cent. of the Company's issued shares at 10 pence per Share (the "Tender Offer");

·      the proposed cancellation of the admission to trading of the Shares on AIM (the "Cancellation"); and

·      the proposed re-registration of the Company as a private limited company (the "Re-registration").

The Circular sets out the terms of the Tender Offer and incorporates notice of a General Meeting to be held on 19 November 2014 at which special resolutions to approve the Cancellation and Re-registration will be proposed.

Pursuant to Rule 41 of the AIM Rules, the Directors have notified the London Stock Exchange of the intention to cancel the admission of Ordinary Shares to trading on AIM, subject to Shareholder approval. Under the AIM Rules it is a requirement that the Cancellation is approved by the requisite majority of Shareholder voting (being not less than 75. per cent of the votes cast).

Subject to the resolutions approving the Cancellation and Re-registration being passed, it is anticipated that Cancellation will become effective on 11 December 2014 and Re-registration will take effect on 17 December 2014.

Further details of the proposals are set out below.

Expected timetable of principal events

All references to time in this announcement are to London time and the dates and times given are based on the Company's current expectations and may be subject to change. Any changes to the expected timetable will be announced via a Regulatory Information Service.

All references to time in this announcement are to UK time. Capitalised terms in this announcement (unless otherwise defined) have the same meanings as set out in the Circular.

Copies of the Circular will shortly be available on the Company's website (www.eredene.com).

Enquiries:

1.  Information on Eredene

Eredene is an independent investment company registered in England and Wales, focussed on investments in Indian infrastructure and in particular on port services and logistics in India.

The Company previously announced on 13 July 2012 that it will not make any investments in new projects, and that it has started to extract value from its portfolio by embarking on an orderly sale of its assets in India with the aim of returning proceeds to Shareholders. As it sells down stakes in its remaining investments, the Company intends to make further phased returns of capital to Shareholders, as part of its realisation strategy.

2.  The Tender Offer

Introduction

As at 31 March 2014, the Company had aggregate cash balances of £1.5m, having returned £15.3 million to shareholders in August 2012, received £8.2 million from the sale of Ocean Sparkle in June 2013 and returned £19.9 million to shareholders in October 2013.

As at 30 September 2014, the Company had aggregate cash balances of £5.5 million, having received £1.9 million from the sale of a 23 per cent. stake in Sattva CFS & Logistics in July 2014 and £3.0 million from the sale of Aboyne Mauritius Limited which held 100 per cent. of Matheran Realty Pte Ltd and Gopi Resorts Pte Ltd.

The Company therefore intends to proceed with the Tender Offer in order to distribute to Shareholders approximately £3m, with the remainder being set for possible desirable follow-on investments in its portfolio and to meet the Company's costs and contingencies. It is envisaged that, following the Tender Offer, the Company will return further surplus cash to Shareholders as and when further disposals are made.

The Tender Offer is designed to enable those Shareholders (other than certain Overseas Persons) who wish to realise Shares or their beneficial interest in Shares (as the case may be) to do so. Shareholders who successfully tender their Shares will receive 10 pence per Share. Further details of the Tender Offer are set out in the Circular.

Benefits of the Tender Offer

The Board believes that the Tender Offer is in the interests of Shareholders as a whole because:

·      a tender offer for up to 12 per cent. of the Shares in issue provides an opportunity for an exit for those Shareholders who wish to receive cash; and

·      a tender offer conducted at 10 pence represents a premium to the prevailing share price of 4.75 pence as at close of trading on 31 October 2014 (being the latest practicable date prior to the publication of the Circular).

Shareholders are not obliged to tender any Shares and, if they do not wish to participate in the Tender Offer, Shareholders should not complete or return their Tender Form.

The key points of the Tender Offer are as follows:

·      the Tender Offer is for up to 12 per cent. of the Shares in issue as at the Record Date;

·      Shareholders (other than certain Overseas Persons) will be entitled to tender up to 12 per cent. of the Shares they hold as at the Record Date (their "Basic Entitlement");

·      Shareholders will be able to tender additional Shares but such excess tenders will only be satisfied to the extent that other Shareholders tender less than their aggregate Basic Entitlements, and will be satisfied on a pro rata basis. Tenders will be rounded down to the nearest whole number of Shares;

·      the Tender Price is 10 pence per Share;

·      the Tender Price will be paid to Shareholders in Sterling and will be effected by the despatch of cheques or the crediting of CREST accounts as appropriate; and

·      any Shares tendered will be cancelled.

The Tender Offer is being made by Numis Securities. Numis Securities will purchase the Shares tendered as principal and, following the completion of all such purchases, will sell the relevant Shares on to the Company pursuant to the Repurchase Agreement at the Tender Price by way of a market transaction.

The repurchase of Shares by the Company under the Tender Offer will be funded from the Company's cash resources, using the special reserve created by the Court-approved cancellation of the Company's share premium account and capital redemption reserve carried out by the Company in 2013.

Conditions

At the Annual General Meeting of the Company held on 5 September 2014, the Shareholders passed a resolution authorising the Company to make one or more market purchases (within the meaning of the Act) of the Shares on AIM , provided (among other things) that the maximum aggregate number of Shares to be purchased is limited to 15 per cent. of the Company's issued ordinary issued share capital at the date of passing of the resolution and the minimum price which may be paid for such Shares is 10 pence per Share (exclusive of expenses). The Tender Offer will be made in accordance with such authority and therefore no further Shareholder approval is required for the Tender Offer.

Implementation of the Tender Offer is conditional upon Numis Securities being satisfied that the Company has sufficient funds available to meet its obligations under the Repurchase Agreement. In addition, the Tender Offer may be postponed or terminated in certain other circumstances as set out in paragraph 2.3 of Part III of the Circular.

The Tender Offer is not conditional on the approval of the Cancellation and the Re-registration at the General Meeting.

Risk factors

In considering the Tender Offer, Shareholders should have regard to the following risk factors:

·      In order to pay the consideration to which Shareholders are entitled pursuant to valid tenders of Shares accepted by Numis Securities (and which the Company will then be obliged to repurchase from Numis Securities), the Company will use a significant amount of its available cash and other liquid funds.

·      As a result of the Tender Offer, the number of Shares in issue will be reduced and the Company will reduce in size. As a result, the fixed costs of the Company will be spread over fewer Shares.

·      Shareholders tendering Shares for sale under the Tender Offer will receive the Tender Price, which may be less than the price at which they bought their Shares.

·      Tender Forms and TTE Instructions, once submitted, are irrevocable. The price of the Shares and the Company's Net Asset Value may rise or fall following submission of a Tender Form or TTE Instruction. After settlement of a TTE Instruction, the Shareholder will not be able to access the Shares concerned in CREST for any transaction or for charging purposes.

The risk factors above are those considered by the Board to be material to the Tender Offer at the date of this announcement; additional risks and uncertainties that are not currently known or are not currently considered material may emerge or become material.

Overseas Persons

The making of the Tender Offer to persons outside the United Kingdom may be prohibited or affected by the relevant laws of the relevant overseas jurisdictions.

Shareholders with registered or mailing addresses outside the United Kingdom or who are citizens or nationals of, or resident in, a jurisdiction other than the United Kingdom should read carefully paragraph 9 of Part III of the Circular.

It is the responsibility of all Overseas Persons to satisfy themselves as to the observance of any legal requirements in their jurisdiction including, without limitation, any relevant requirements in relation to the ability of such persons to complete and return a Form of Proxy or Tender Form or to make a TTE Instruction.

The Tender Offer is not being made directly or indirectly in, into, or from the United States, Australia, Canada, Japan or the Republic of South Africa, except where permitted by applicable law. Accordingly, the Tender Form is not being sent to Shareholders with registered addresses in the United States, Australia, Canada, Japan or the Republic of South Africa and may not be distributed or sent in, into or from (whether by use of mails or by any means or instrumentality of interstate or foreign commerce) such jurisdictions and doing so may render invalid any purported tender. Any person (including, without limitation, custodians, nominees and trustees) who may have a contractual or legal obligation to forward the Tender Form should read paragraph 9 of Part III of the Circular before taking any action.

Any Shareholder who is unable to give the warranties set out in paragraphs 6.1.9, 6.1.10 and 6.1.11 in Part III of the Circular will be deemed not to have tendered their Shares pursuant to the Tender Offer and their Tender Forms may be rejected.

Other

The attention of Shareholders is drawn to the letter from Numis Securities set out in Part II of the Circular and to Part III of the Circular which, together with the accompanying Tender Form, constitute the terms and conditions (the "Terms and Conditions") of the Tender Offer.

Details of how to tender Shares can be found in paragraph 4 of Part III of the Circular.

3.    Background to and reasons for the Cancellation and Re-registration

In the Preliminary Results announcement of 12 August 2014, the Board said that it was considering the cancellation of the admission of the Company's shares to trading on AIM at some future date in order to further reduce operating costs and further achieve its divestment strategy.

The Board believes that the Company's divestment strategy, as referred to in section 2 above, will be better achieved as a private company, without the regulatory, disclosure and administrative processes required of a publicly listed company.

In addition, the Board is of the view that the Cancellation will further reduce the recurring administrative costs associated with maintaining its AIM listing.

The Board has therefore concluded that the commercial disadvantages and costs of maintaining admission to trading on AIM at a time when the Company is completing its realisation strategy, outweigh the potential benefits and that it is therefore no longer in the Company's or its Shareholders' best interests to remain traded on AIM.

Following the proposed Cancellation, the Directors consider that there is little benefit to maintaining the Company's status as a public limited company together with the extra costs and administrative burdens associated with such status.

The main advantage to the Company of re-registering as a private limited company relates to its ability to effect a capital reduction in the future in order to create distributable reserves and return value to Shareholders, in keeping with its current realisation strategy. The procedure involved in effecting a capital reduction for a private limited company is simpler and more cost effective than that which applies to a public limited company (where a court process is involved).

The principal effects that Cancellation would have on Shareholders include the following:

·      the Company will cease to retain a nominated adviser and broker;

·      the Cancellation might have either positive or negative taxation consequences for Shareholders. Shareholders who are in any doubt about their tax position should consult their own professional independent adviser immediately;

·      there would no longer be a formal market mechanism enabling Shareholders to trade their Shares on AIM or any other recognised market or trading exchange;

·      while the Shares will remain freely transferable, they may be more difficult to sell compared to shares of companies traded on AIM. It may also be more difficult for Shareholders to determine the market value of their shareholdings in the Company at any given time, which could adversely affect their value;

·      the Company will no longer be subject to the AIM Rules. Shareholders will therefore no longer be afforded the protections given by the AIM Rules. As such the Company would not be bound to:

-       make any public announcements of material events, nor to announce interim or final results;

-       comply with any of the corporate governance practices applicable to AIM companies;

-       be subject to the Disclosure and Transparency Rules and, among other things, will no longer be required to disclose major shareholders in the Company;

-       announce substantial transactions and related party transactions; or

-       comply with the requirement to obtain shareholder approval for reverse takeovers, changes to the Company's investing policy and fundamental changes in the Company's business.

The Company will however remain subject to the Act, which mandates shareholder approval for certain matters. The Company will also continue to be subject to the City Code for the period of ten years from the date of Cancellation.

The Company will continue to retain the services of its Investment Manager, Ocean Dial Asset Management Limited.

Notwithstanding the Cancellation, the Company will continue to prepare and send to shareholders audited annual reports and accounts and to hold annual general meetings and other general meetings in accordance with the applicable statutory requirements and the Company's articles of association.

The Board intends to continue to provide an investor relations website and to post portfolio updates on that website from time to time, although Shareholders should be aware that there will be no obligation on the Company to include all of the information required under AIM Rule 26 and to update the website as required under the AIM Rules.

Shareholders should be aware that if the Cancellation takes effect, they will at that time cease to hold shares in a quoted company and will become shareholders of an unquoted company which will significantly reduce the marketability and liquidity of the Company shares and the principal effects referred to above will automatically apply to the Company from the date of the Cancellation.

4.    Process for Cancellation

Rule 41 of the AIM Rules requires an AIM company that wishes the London Stock Exchange to cancel the admission of its Shares to trading on AIM to notify such intended cancellation and separately inform the London Stock Exchange of its preferred cancellation date at least twenty Business Days prior to such date. In accordance with AIM Rule 41, the Directors have notified AIM of the Company's intention to cancel the Company's admission of the Shares to trading on AIM.

The Cancellation is also conditional upon the consent of not less than 75 per cent. of votes cast by Shareholders at a general meeting. The Notice of General Meeting at the end of the Circular contains Resolution 1 which proposes that the Company's admission to trading on AIM be cancelled.

If Resolution 1 is passed at the General Meeting, the Cancellation will be effective at 7.00 a.m. on 4 December 2014.

The Shares will remain eligible for settlement in CREST. Accordingly, Shareholders will continue to be able to hold their shares in CREST after Cancellation.

5.    Process for the Re-registration

Assuming Resolution 2 to approve the Re-registration is passed, the Company intends to make an application to be re-registered as a private limited company under the Act by the name of Eredene Capital Limited.

Under the Act, as part of the Re-registration, the Company is required to make such changes to its articles of association as are required in connection with the Company becoming a private company limited by shares. Resolution 2 includes the adoption of new articles of association. The proposed new articles of association adopt the model articles for private companies limited by shares, but retain certain provisions from the existing articles of association, including the retirement of directors by rotation and the requirement to hold an annual general meeting.

The Re-registration requires the approval of not less than 75 per cent. of the votes cast by Shareholders at a general meeting.

6.  Trading in the Shares after Cancellation

The Company intends to put in place an electronic off-market dealing facility for the Shares which will be administered by Asset Match, a firm authorised and regulated by the Financial Conduct Authority. The facility will allow Shareholders to trade their Shares on a matched bargain and arm's length basis via periodic auctions to be held every three months.

The facility operates under its own code of practice which governs the behaviour of participants and the running of the auctions. This code of practice is available to view atwww.assetmatch.comand requires that among other things the Company:

-       has management information systems and a sound system of internal controls appropriate to its size, so as to provide a reasonable basis for it to make informed decisions about its financial position and prospects;

-       has adopted a code of dealings in relation to the Shares for directors and their connected persons and relevant staff, based on the UK Listing Authority's Model Code on directors' dealings; and

-       provides all shareholder communications and submissions made to Companies House to be made available on the Company's page on the Asset Match website.

It is intended that this facility will be put in place shortly after the date of Cancellation, and will be available for at least one year from the date of Cancellation and reviewed thereafter.

Further details will be made available after Cancellation on the Company's website atwww.eredene.comand atwww.assetmatch.com.

7.  Future Strategy and Investing Policy

The Company was established as an investing company and sought admission to trading on AIM in February 2005 with a strategy to seek investment opportunities in India and to raise capital in order to fulfil its Investing Policy.

The Company does not currently envisage making any further investments in new projects and intends to concentrate on extracting maximum value from the existing portfolio. All future substantive realisations are also expected to give rise to a return of capital to Shareholders.

8.    Taxation

The following paragraphs are intended only as a general guide to certain aspects of current UK tax law and HM Revenue & Customs' published practice, and do not constitute tax advice. They are of a general nature and only apply to Shareholders who are resident or ordinarily resident in the United Kingdom (except where indicated) and who hold their Shares beneficially as an investment.

Shareholders who sell Shares in the Tender Offer should, subject to the following, be treated as having sold their Shares in the normal way and may, depending on their individual circumstances, incur a liability to taxation on chargeable gains. Individual Shareholders and trustee Shareholders in the United Kingdom should be aware that HM Revenue & Customs may seek to treat part of the disposal proceeds of their Shares as income under the provisions of Chapter 1 of Part 13 ITA 2007, although it is not expected that these provisions would apply to sales made for genuine commercial reasons.

The attention of Shareholders is drawn to Part IV of the Circular which sets out a general guide to certain aspects of current United Kingdom taxation law and HM Revenue & Customs' published practice.

Shareholders who are in any doubt as to their tax position or who are subject to tax in a jurisdiction other than the United Kingdom should consult an appropriate professional adviser.

The Cancellation may also have certain tax consequences for Shareholders and those Shareholders who are in any doubt about their tax position should consult their professional advisers as to their tax position before taking any action relating to the Cancellation.

9.  Notice of General Meeting

The General Meeting has been convened for 10.00 a.m. on 19 November 2014, at which Shareholders will be asked to consider and if thought fit, to approve the Resolutions in order to implement the Cancellation and the Re-registration.

The Resolutions to be proposed at the General Meeting are:

·      to approve the Cancellation; and

·      to approve the Re-registration.

The approval of 75 per cent. of those Shareholders voting in person or by proxy in favour is required in order to pass each of the Resolutions.

10.   Letters of intent

The Company has obtained non-binding letters of intent to vote in favour of the Resolutions from its three largest Shareholders being Raju Shakla, Caledonia Investments plc and Rebelco NV (whose holdings amount in aggregate to 56.76 per cent. of the issued share capital of the Company).

The Hon Charles Cayzer, a director of Eredene Capital PLC, is also a Non-Executive director of Caledonia Investments plc and is Chairman of the Cayzer Trust, which has indicated its intention to vote in favour of the Resolutions. The Cayzer Trust holds approximately 1.78 per cent of the existing issued share capital of the Company.

11.        Recommendation

The Directors consider that the Tender Offer, the Cancellation and the Re-registration are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting.

The Directors intend to vote in favour, or procure the vote in favour, of the Resolutions at the General Meeting in respect of their own beneficial holdings of Shares which, in aggregate, amount to 61,690 Shares, representing approximately 0.025 per cent. of the issued share capital of the Company at the date of this letter.

The Directors can make no recommendation to Shareholders in relation to participation in the Tender Offer. However, Shareholders should note that the Directors intend to tender their Basic Entitlement. Whether or not Shareholders decide to tender their Shares will depend on, among other things, their own individual circumstances including their tax position. Shareholders should be aware that the Tender Offer is part of the Company's realisation strategy which is expected ultimately to result in the liquidation of the Company in the full return of capital to Shareholders.