(CGG) Coburg Group

Coburg Group plc

("Coburg" or "the Company")

Result of general meeting

3 February 2012

The Company is pleased to announce that at the general meeting held earlier today, resolutions 1 and 2 were passed unanimously. Including proxies, shareholders representing over 75 per cent. of the Company approved these resolutions.

As a result of the sale of the coffee business, the Company will become an investing company pursuant to Rule 15 of the AIM Rules for Companies and the Directors will now seek to implement the investing policy set out in its circular dated 12 January 2012 and as announced on 10 January 2012.

Following representations from Shareholders, Directors withdrew resolutions 3,4 and 5 which would have given the Directors authorities to issue shares and to buy back deferred shares.

Enquiries:

Coburg Group plc

("Coburg" or "the Company")

Proposed disposal of all trading activities

Proposed New Investing Policy

10 January 2012

The Board is today announcing that the Company has agreed to dispose of  its coffee business and for the conversion of the Company to an investing company. The Disposal as well as the new investing policy are conditional, inter alia, on the consent of Shareholders. The terms of the proposed sale and new investing policy are set out below.

A circular will shortly be sent to shareholders convening a general meeting on [3 February 2012]. Definitions, which are set out below, will be as used in the circular.

Enquiries:

Terms of the proposed sale and new investing policy

The Consideration for the Disposal is £207,882 subject to adjustment on Completion, and is payable in three instalments. Details of the consideration to be received are set out below.

The purchaser under the Sale and Purchase Agreement is New Coburg Ltd, a wholly owned subsidiary of Tudeley Holdings Limited, a company owned by Konrad P Legg a Director of the Company.

After completion of the Disposal, the only assets currently owned which will be retained by the Company will be a small portfolio of listed securities, with a middle market value  as at 6^th January 2012 of £17,9628. The Company will also  be owed £72,882 by New Coburg Ltd (being the deferred element of the consideration payable under the Sale and Purchase Agreement). The Company will, after Completion, have no trading activities.

Accordingly, under Rule 15 of the AIM Rules the Company is required to send a circular to Shareholders setting out the reasons for, and the principal terms of, the Disposal. The Company is also required to seek the approval of Shareholders of the proposed new Investing Policy which, subject to Shareholder approval the Board propose to adopt and implement after Completion.

Since the intended purchaser of the Disposal Assets, New Coburg Ltd, is indirectly owned by and is  controlled by a Director of the Company and members of his immediate family, the Disposal is a "Related Party Transaction" under Rule 13 of the AIM Rules.

Background to and reasons for the Disposal

The Chairman's Statement in the Report and Financial Statements for the year ended 30^th April 2011 referred to the loss after tax of £146,000 for that year and the sharp deterioration in gross margins.

It stated:

"Overheads were well controlled but the main problem was a sharp deterioration in gross margins caused by our inability to pass on to customers the full impact of the big rise in green coffee prices experienced during the period."

"The directors are exploring various strategic scenarios to reduce the group's exposure to the coffee business. This may involve bringing in new investors or divesting all or part of the business so that future funding will no longer be the responsibility of Coburg Group plc shareholders"

"...it is hoped that the AIM listed company can expand and develop in new directions. In due course this may require the Company to be "reclassified" as an investing company which will require the approval of shareholders. The directors and major shareholders are hopeful that they will be able to identify suitable new opportunities for the Company".

 The Directors see no near term prospect of significant margin improvement in the coffee businesses and have undertaken extensive exploratory discussions with a view to a sale of the coffee business assets to a third party.

However, no offers considered by the Board to be realistic have been received other than the cash offer received from New Coburg Ltd.

The Directors, other than Konrad Legg, consider the Disposal terms to be fair and reasonable and that it is in the interests of Shareholders that the Company accept them.

Further information as to the terms and conditions of the Disposal and as to the proposed new Investing Policy is given below. 

Legg Family interests in the Company and in New Coburg Ltd

Konrad Legg and members of his immediate family own the whole of the issued share capital of Tudeley Holdings Limited and control Investeco Overseas Holdings Limited, both of which companies own shares in the Company. Taken together, the shareholdings in the Company of Konrad Legg, Tudeley Holdings Limited and Investeco Overseas Holdings Limited amount to 115,790 ordinary shares which represents 28.04 per cent of the Company's issued ordinary share capital.

Tudeley Holdings Limited has provided loan facilities to CCC, which is one of the Company's Trading Subsidiaries. At 31^st October 2011 CCC owed Tudeley Holdings Limited approximately £101,433 in respect of borrowings under these facilities. CCC's borrowings from Tudeley are secured by fixed and floating charges in favour of Tudeley over CCC's undertaking, business and assets. These charges rank, in terms of priority, behind security given by CCC to Barclays Bank plc.

Principal terms and conditions of the Disposal

Under the Sale and Purchase Agreement and subject to satisfaction of the Conditions, the Company has agreed to sell and New Coburg Ltd has agreed to purchase the Disposal Assets for £135,000 in cash payable on Completion (subject to any necessary completion adjustment), £21,990 six months after Completion and £50,892 one year after Completion.

The Disposal Assets to be acquired by New Coburg Ltd and the consideration attributable to them are:

(i)         the whole of the issued share capitals of CCC and CK, which are the two trading subsidiaries of the Company - £93,941;

(ii)        the Loans which represent the balances at Completion due by CCC and CK to the Company on loan account and any other account - £103,049; 

(iii)       the Trade Marks, which comprise all the trade marks owned by the Company (all of which have current or potential relevance to the businesses of CCC or CK) - £9,999; and

(iv)       the shares of the two dormant subsidiaries of the Company - £1.

The Disposal Assets are valued in the Company's consolidated balance sheet as at 31^st October 2011 at £439,000 including goodwill of £147,000.

Tudeley Holdings Ltd has guaranteed the performance by New Coburg Ltd of its obligations to the Company under the Sale and Purchase Agreement. Tudeley has also agreed to procure the release of the Disposal Assets by Barclays Bank plc on Completion, from the debenture under which they are currently charged.

Conditions of the Disposal, which must be satisfied before Completion include:

Shareholder approval of the Disposal; and

Shareholder approval of the Investing Policy.

Group employees whose contracts of employment have been with the Company, but who were  engaged in the businesses of CCC and CK, have by mutual agreement with all employees, now been transferred to CCC.

Use of Proceeds of the Disposal

The proceeds of the Disposal will be used in accordance with the new Investing Policy referred to below.

Proposed Investing Policy

Following the placing of new ordinary shares in January 2011 the Board resolved to establish a small portfolio of listed shares in natural resource companies. It is now proposed to expand this portfolio.

It was agreed that these investments should include agriculturally based businesses as well as mining and mineral exploration companies. Mr Legg is a director of MP Evans Group plc a large far eastern palm oil plantation business; he also has extensive experience of large scale farming businesses in Africa and elsewhere.

The directors with the support and encouragement of the major shareholders, intend in due course to expand the Company's investments in the farming, plantations, agribusiness, and natural resources sectors including mining and exploration (the "Investment Sectors").

It is anticipated that the Company will take minority stakes in smaller listed and AIM companies operating in the Investment Sectors. Where practicable. the Company will seek to appoint non-executive directors to the boards of these companies to assist with their development. However, the Company will probably not be involved in the management of these businesses, and investments are therefore likely to be passive in nature.

In due course it is the intention of the Directors to expand the capital base of the Company to enable a more active pursuit of this policy,  most likely through a placing of shares. Where the Board considers it is in the  best interests of Shareholders, the Company may seek to acquire assets using its own shares as consideration.The Company will also be permitted to borrow to fund part of the cost of investments.

Initially, the portfolio will be concentrated but as the Company grows and develops, the Directors intend that after about four years, no investment should  account for more than 20  per cent. of the total value of the portfolio. Should the Directors identify an acquisition that constitutes a reverse takeover under Rule 14 of the AIM Rules, shareholder approval will be sought.

The Company will generally seek to realise its investments within approximately  five years from the date of acquisition. However, because stock market and business cycles can change rapidly, as can prevailing economic and political circumstances, the Company's objective to realise investments within that timeframe may not be possible in all circumstances.

Through investment in these assets, the Directors hope to generate capital growth for Shareholders.

Buy back and cancellation of Deferred Shares

The off market purchase of all of the Deferred Shares in the capital of the Company for £1 in aggregate (not £1 per Deferred Share),  was authorised by resolution 3 passed at the general meeting of the Company held on 15^th October 2010. That authority expires in accordance with section 694 of the Companies Act 2006 on 31^st January 2012.

Resolution 3 in the Notice of Meeting at the end of the circular, renews the Company's authority to buy back the Deferred Shares and the Company proposes to use the authority so conferred and to complete the buy back of the Deferred Shares as soon as practicable after the General Meeting, assuming that Resolution 3 is passed.

Under the terms of issue of the Deferred Shares, which now appear in Article 4 of the Company's Articles of Association, the Company is authorised to appoint a person to act as agent for all the holders of the Deferred Shares to complete the buy back on their behalf. No consideration is payable to the holders of the Deferred Shares.

The Company has authorised Chris Birkle, the Chairman, for this purpose.

The Deferred Shares do not carry the right to participate in dividends or other distributions made by the Company and do not carry voting rights.

The Deferred Shares once purchased by the Company, will be cancelled.

A copy of the conditional contract for the purchase by the Company of all the Deferred Shares for a consideration of £1 in aggregate, dated 9th January 2012 and signed by Chris Birkle on behalf of all the holders of the Deferred Shares, will be available for inspection at the Company's registered office from the date of the circular until the conclusion of the General Meeting and will also be available for inspection during the General Meeting. This contract is conditional on the passing of Resolution 3.

Authority to allot further shares and temporary disapplication of statutory pre-emption rights

Warrants and options to subscribe for ordinary shares are currently outstanding under which warrant and option holders are entitled to subscribe for a total of 179,250 ordinary shares. New authority to allot such shares is required to enable the Company to meet its obligations to warrant and option holders if warrants or options are exercised. Company law requires that in the present circumstances, the consideration for the buy back of the Deferred Shares is funded out of a new issue of ordinary shares. The Directors are in addition to the 179,250 ordinary shares referred to above, seeking authority to allot up to 750 additional new ordinary shares.

The necessary Resolutions are Resolutions 3 and 4 in the Notice at the end of the circular. This authority, if granted, will expire at the next Annual General Meeting of the Company (unless then renewed).

Directors' Recommendation

The Independent Directors having consulted with the Company's Nominated Adviser, consider that the terms of the Disposal are fair and reasonable insofar as the Company's Shareholders are concerned. Further, the Directors consider that the proposed Investing Policy is in the interests of the Company and the Shareholders.

Accordingly, the Independent Directors unanimously recommend Shareholders to vote in favour of the Resolutions, as they intend to do in respect of their own beneficial shareholdings amounting, in aggregate, to 7,910 ordinary shares representing approximately 1.92 per cent of the issued share capital of the Company.

DEFINITIONS

The following definitions apply throughout the circular subject or context otherwise requires: